This is the first article in a four-part series looking at labor issues affecting grocery retailers.
The grocery industry is full of executives who have made the long journey from the checkout stand to the C-suite.
Kroger CEO Rodney McMullen started as a stock clerk for the chain in 1978 while attending the University of Kentucky. Wakefern's Joe Sheridan was originally hired at the company's Elizabeth, New Jersey, warehouse in 1976. Five years later at a Hy-Vee store in Chariton, Iowa, Randy Edeker took a part-time job that would eventually lead him to the CEO's desk.
Outside the board room, senior roles are filled with longstanding employees. Publix's Jeff Chamberlain recently announced his retirement as the chain’s senior vice president of real estate and facilities after starting with the company as a desk clerk 47 years ago.
And the list goes on. The intricacies of handling and merchandising perishable goods has long favored individuals steeped in the industry. But as digital disruption, fast-changing consumer preferences and a growing bench of competitors continue to rattle the established order, the number of years spent in the industry may not count for as much as they once did.
John Stanton, Ph.D., professor of food marketing at Saint Joseph's University, said the way grocers identify, onboard and train their executive leadership needs to adapt to the forces impacting it.
"Generally speaking, the existing process is quite internal. It’s people being promoted up and people coming from other food retailers. It tends to be patriarchal," Stanton told Grocery Dive. "But the most valuable traits for executive leadership are changing and while we know no one likes change, the supermarket industry is probably one of the biggest leaders in not wanting change."
Fresh ideas in data and technology
Leslie Sarasin, president and CEO of the Food Marketing Institute (FMI), estimates at least half of current executives in the industry started in entry-level positions and rose through the ranks. In the 11 years she's been with FMI, she said she's seen a growing trend of grocery retailers seeking leadership from other industries.
Chief among those is grocers' digital departments. With the widespread adoption of smartphone apps, data analytics, online grocery and other technology upgrades, companies are increasingly turning to outside talent — particularly veterans from industries that have spent years navigating digital disruption.
Last year H-E-B named Jag Bath, CEO of on-demand delivery company Favor, which the grocer had recently acquired, to its newly created role of chief digital officer. In 2017, Albertsons appointed Disney veteran Narayan Iyengar as head of digital marketing and e-commerce, while California grocer Raley's poached Mike Molitor from PetSmart to head its e-commerce and loyalty operations.
Figuring out which innovations to adopt and which to skip is a challenging proposition for an industry that has until recently remained untouched by rapid-fire technology advancements. Retailers may not have the time to build in-house R&D departments or to cultivate a more technology-focused leadership from within their existing talent pools, said Stanton.
Changing technology leadership points to a need for executives across divisions who can keep up with the latest innovations, he noted. Grocers are also prioritizing leaders who can collect and process valuable customer data.
"Slowly but surely, people who are getting promoted up that chain are becoming more analytic not just in the data sense, but when it comes to looking at their business from a numbers point of view more than before," Stanton said. "And in my opinion, they will be getting younger and younger because the younger generations are driving the analytic approach."
Retailers could also benefit from fresh ideas in non-technology sectors, Stanton said. Before being named president and CEO of Walmart U.S. in 2014, Greg Foran had spent most of his career in Australia and his native New Zealand working for Woolworths, a popular retail chain. His appointment came as a surprise, especially in a company known for grooming talent internally, but he's now widely credited with reviving Walmart's grocery business by focusing on fresh food and a rapid e-commerce rollout.
Foran announced last week that he would be leaving Walmart to take the role of chief executive at Air New Zealand. John Furner, formerly head of Sam's Club, will take over for Foran.
There are numerous recent examples of executives crossing over between the food, grocery and restaurant industries. Albertsons appointed PepsiCo veteran Vivek Sankaran as its chief executive earlier this year, while Starbucks named former Sam's Club CEO Rosalind Brewer its chief operating officer in 2017.
No research currently exists that measures the effectiveness of internally groomed versus externally recruited executives in grocery. Research from The Conference Board shows most companies appoint chief executives from within, but the percentage of externally recruited CEOs at top companies has nearly tripled over the past 40 years. According to a study of the hospital industry published last year by Harvard Business Review, CEOs brought in from outside the company boosted overall productiveness.
"We found that any type of leadership change will result in short-term adverse impacts on a firm’s operational efficiency, but outsider CEOs experienced a clear advantage in productivity gains," HBR wrote in its summary.
“Slowly but surely, people who are getting promoted up that chain are becoming more analytic not just in the data sense, but when it comes to looking at their business from a numbers point of view more than before. And in my opinion, they will be getting younger and younger because the younger generations are driving the analytic approach.”
Professor of food marketing, St. Joseph's University
The 'nuances' of grocery retail
While interest in outside talent is growing, Sarasin said traditional leadership skills like strong communication and being able to connect with people at a personal level will continue to be valuable. Additionally, the institutional knowledge that comes with starting a career in grocery and working one’s way to the top is not something that a new executive from a different retail channel can pick up overnight.
"Tech talent will be a hot commodity, but it’s not the only skill set that a successful individual will need," Sarasin said. "The challenge for individuals coming from the outside is to make sure that they understand the nuances of grocery retail. When considering new hires we have to make sure that we don’t get blown away by their tech experience and the wonderful aptitude they have for the tech world to the detriment of the ability to meet customer needs."
Hiring externally can also pose cultural challenges for retailers, said Jose Tamez, managing general partner at executive recruiting firm Austin-Michael.
"Not all retailers have the same culture as grocery. It’s a very institutionalized type of culture and much of that is embedded in the operations side of the business," he told Grocery Dive. The industry has legacy processes and customs built into management, Tamez said, which can make transitions with outside executives tricky.
Corporate history books are full of executives who struggled to shift industries and corporate cultures. Former Apple executive Ron Johnson, who had revolutionized the company's retail stores, took the helm of J.C. Penney in 2011. Just two years later, after trying unsuccessfully to scale back discounts and transform stores into a more upscale experience, he was ousted.
Recognizing a bad fit can be difficult to forecast during the initial hiring phase, when many companies tend to fall in love with someone’s potential, Tamez said. To combat downstream struggles with cultural assimilation, he encourages companies to focus less on hiring the right professional and more on hiring the right person.
"People are hired for what they know and what they have done, but they are unsuccessful or get terminated because of who they are," he said. "The appeal of a potential new hire almost acts as an elixir to a company, but what’s important to consider is who they are. Do they have agility, do they work well cross-functionally? Can they communicate and foster relationships that can be leveraged?"
Grocery retailers focused on attracting talent from other segments should be prepared to step up recruiting efforts, too. Tamez said retail executives outside of grocery often see the sector as a less glamorous type of retail.
"Grocery needs to do a better job of actually doing true recruiting," Tamez said. "They haven’t been doing it because they have never really had to compete for talent outside their own channel, but when you do venture outside you have to really court people."
Large chains are constantly fine-tuning their reporting structure and procedures for funneling talent up through the ranks, said Stanton. But retailers should also reassess how they measure talent, he noted. Opening the door for younger workers who might have an aptitude for technology and innovative thinking is one such step.
Smaller chains and independent grocers, meanwhile, face the challenge of competing with larger competitors for top talent. Many have combated this by forging strong work cultures and promoting from within, but National Grocers Association spokesperson Laura Strange told Grocery Dive that independents are starting to open up to outside perspectives.
"I think what you will see is an encouragement in the independent grocery industry to get different types of experiences that aren’t just necessarily grocery," she said. "I think we certainly have a lot of next-level, next-generation folks coming up within grocery who are very passionate, particularly in the independent supermarket industry."
Whether choosing executive leadership from in-house or seeking fresh talent elsewhere, Tamez said grocers should keep an open mind and proceed carefully.
"At the end of the day, recruiting is really an exercise in risk management," he said. "If you don’t have some form of risk management built into your recruiting and talent acquisition, you are void of a major component that could affect your success."